Foreclosure
A program intended to provide assistance to homeowners who had lost their income will only pay out half of what was expected. Image: Flickr / sercasey / CC-BY

As a part of the Dodd-Frank financial overhaul, the Department of Housing and Urban Development was given $1 billion to provide mortgage assistance to unemployed individuals. The application period for the Emergency Homeowners’ Loan Program has come to an end, and half or less of the available funds will be used.

The Emergency Homeowners’ Loan Program

As first outlined in the Dodd-Frank financial overhaul bill, the Emergency Homeowners’ Loan Program was designed to provide zero-interest bridge loans to homeowners who have been hit by the financial downturn. The loans were intended to target individuals who had lost their jobs, and would provide up to $50,000 interest-free until the person’s income was restored to previous levels. Past-due mortgage payments and mortgage payments moving forward would be covered under the loan program as well.

Very strict qualifications

The qualifications an individual must meet in order to qualify for EHLP are very strict. The homeowner must be able to show a 30 percent reduction in income due to job loss or medical costs. If income reduction is due to job loss, then the homeowner must not have been out of work for more than 12 months. The mortgage the loan is intended to pay must also be a full three to six months behind, depending on the mortgage. Half-payments or partial payments of the mortgage may reduce the qualification of the application, since the number of months behind are figured based on the total amount of the mortgage.

Only half of billion claimed

The Housing and Urban Development based program opened to applications on June 20, and ended in mid-September. The goal was to assist at least 30,000 homeowners. Of the 100,000 applications received, only about 10,000 to 15,000 are expected to be ultimately approved. The remaining available money that has been budgeted for the program will be returned to the general Treasury budget.

Questions about program marketing

The EHLP program has not had a smooth path. The program launched late, had to create a data-collation system for the multitude of community groups tapped to help screen homeowners. When a very small number of qualifying applications were received, the application deadline was spread out over another three days. The program was also not heavily marketed, which some say is the hallmark of another failed homeowner-assistance program.

Sources:

CNN Money: http://money.cnn.com/2011/10/03/news/economy/mortgage_unemployed/?npt=NP1
Marketwatch: http://www.marketwatch.com/story/obama-jobless-mortgage-program-to-end-half-used-2011-09-28
USA Today: http://www.usatoday.com/money/economy/housing/story/2011-09-29/foreclosure-program/50598036/1
Wall Street Journal: http://online.wsj.com/article/SB10001424052970203405504576599110626013214.html

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